Private oil company PT Vivo Energy Indonesia has increased its fuel prices, following Pertamina’s step in increasing the latter’s prices on Pertalite subsidized fuel and non-subsidized Pertamax on September 3, 2022. Previously, Vivo sold its revvo 89, research octane number (RON) 89 fuel, at a lower price of IDR 8,900/liter. The government ordered Pertamina to sell RON 90 Pertalite that a price of IDR 10,000/liter. Two days later, Vivo raised the price of its revvo 89 fuel to IDR 10,900/liter.
The government, through the Ministry of Energy and Mineral Resources (ESDM), had asked Vivo to raise its RON 89 fuel price. However, the ministry denied of intervening Vivo’s policy to raise its revvo 89 price. Vivo stated that the company planned to deplete the stock of revvo 89 to comply with the government’s policy to phase out the sale of low–octane fuel by December 31, 2022. However, this still does not explain why they sold a lower RON fuel at a higher price than a higher RON fuel.
“PT Vivo Energy Indonesia has taken necessary steps to deplete our Revvo 89 inventory by the end of this year,” Vivo said in a statement.
Pertamina provides lower prices than foreign oil firms
Previously, the energy ministry’s Director General Tutuka Ariadji communicated with Vivo that the company would adjust its fuel prices in regard to Pertamina’s fuel price increase. The timing of the increase of revvo 89 price two days after Pertalite’s increase, however, left an impression that it was more than a coincidence.
“Yes, I have already communicated with Vivo’s management. Later, they will adjust to the current condition, they will set the price,” Ariadji said as quoted by CNNIndonesia.com on September 4, 2022. “Previously and until now, Vivo has spent their stock of Ron 89 for the next two months at a price that is affordable by the community.”
Ariadji explained that the retail selling price was calculated and determined by the business entities themselves. Based on the ministry’s policy No 62.K/12/MEM/2020 ESDM, the government only mandates an upper limit formula, in which the fuel price refers to the MOPS/Argus market reference price and distribution costs with a maximum margin of 10% for business entities.
“Based on this, the government will reprimand business entities if they sell fuel exceeding the upper limit. The determination of selling prices at gas stations is currently a business entity policy that is reported to the Minister cq. Director General of Oil and Gas. So it is not true that the government asks business entities to increase prices,” he said.
Cheaper fuel prices in Malaysia
Meanwhile, the price of RON 95 fuel in Malaysia is cheaper than Pertamax RON 92 sold by Pertamina.
Reporting from RinggitPlus, the price of Malaysian RON 95 gasoline is only 2.05 ringgit per liter or the equivalent of IDR 6,814 (assuming an exchange rate of IDR 3,324 per ringgit). Meanwhile, the price of Pertamax RON 92 is at IDR 14,500/liter. When compared to the Revvo 95 sold by Vivo Indonesia at IDR 16,100/liter, Malaysia’s RON 95 fuel is much cheaper.
However, the price of diesel fuel in Malaysia is more expensive than in Indonesia. The price of diesel fuel in the neighboring country is recorded at MYR 2.15/liter or the equivalent of IDR 7,148/liter. Meanwhile, the price of subsidized diesel fuel Biosolar sold by Pertamina is only IDR 6,800/liter.
Pertamina President Director Nicke Widyawati said the price of fuel in Malaysia was cheaper because the subsidies disbursed by the government to Petroliam Nasional Berhad (Petronas), a Malaysian-owned oil and gas company, were greater than those disbursed by Indonesia.
“Petronas subsidies are much larger than Indonesia’s. That’s why the selling price of fuel is cheaper because the oil used by Malaysia, America and Indonesia is based on world oil. It’s actually the same,” she said at a hearing with Commission VI overseeing industry and investment of the House of Representatives some time ago.
No competition in oil industry
Other private oil companies such as Shell and BP–AKR also never sell their fuel at a higher price than Pertamina’s. If the case of Vivo’s increased fuel price was caused by the government’s policy through the ministry, foreign companies and investors – who are planning to enter Indonesian market to sell fuel at a competitive price – must be aware of the policy or at least the trend surrounding the increasing fuel prices.
Foreign oil companies – through its retail subsidiaries – are likely unable to sell fuel at lower prices in Indonesia than Pertamina’s standards.
